Student debt keeps rising

April 1, 2010

No de-leveraging here…


(Click here to enlarge)

The vast majority of loans come from the government. It’s doing students more harm than good offering them. More debt on offer to pay for an asset — whether a house, a security, or a college education — just inflates its price.

For other assets, it’s easy to sit out the borrowing arms race. Dwellings can be rented, savings parked somewhere besides frothy stocks or bonds. But every year there’s a new crop of 18 year-olds that have to pay the debt-inflated price of tuition.

(ht Stephen Culp, Reuters)


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How can education be properly valued? Sure, there are all the correlations of income and education, but I question the causality. It’s quite possible to get a terrible education while paying loads for it. Without a proper evaluation, there’s nothing to keep providers from endlessly elevating the price of admission while blabbing about “bettering yourself” and “being all you can be”

And there are no refunds and no test rides! Somehow we’ve reached the point where everybody says “you better go to college to get a good job” even as the level of ignorance revealed by testing shows the nation is falling further and further behind other countries.

I feel that if you know precisely what you need to learn with a specific goal in mind, do it. But, if you are going to get loans just to “get educated” so things will be better down the road, think it over many times.

Posted by Chicagoboy | Report as abusive

[…] Student debt keeps rising | Analysis & Opinion | Reuters […]

Posted by In Debt? What are Your Options? | Debt Management | Report as abusive

[…] Student debt keeps rising Rolfe Winkler […]

Posted by Links 4/2/10 « naked capitalism | Report as abusive

A simple way to value education is return on investment.

Private US colleges now deliver negative lifetime return on investment to most attendee. This post shows the calculation, using public data from the US Census and the College Board: ollege-become-a-bad-investment/

Obviously education has nonfinancial benefits, but if the system as a whole is delivering negative ROI, it is obviously broken.

Posted by zipflash | Report as abusive

[…] Winkler looks at the rising cost of higher education: “For other assets, it’s easy to sit out the borrowing arms race. Dwellings can be rented, […]

Posted by Wonk Room » The WonkLine: April 5, 2010 | Report as abusive

You can’t argue a college education is a negative present value deal without factoring in the differing unemployment rates of college v. high school degrees. Not only do college degreed people earn more, that also have a significantly lower unemployement rate.

You also shouldn’t make said argument with the assumption that life stops after age 60 something (40 year working life), as the college degreed worker is both more likely to be able to continue working longer AND more able to provide an enhanced income stream in retirement rather than solely living off the dubious future of social security.

Posted by Beezlebufo | Report as abusive

Having debts of 33K at the age of 21 – I cannot have imagined I would ever have undertaken a degree course with that outcome. My son is though. We, like so many other unfortunates earn just above the threshold for any maintenance grant. Our contribution to his further education will stretch us financially but will barely skim the surface of the lake of debt the poor guy is going to have. Yes it is fair to pay for some part of further education but this is ridiculous.
I hope above all that it is the good investment that it is cracked up to be. I’m yet to be convinced.

Posted by nonplussed | Report as abusive

[…] a look at this chart (via Rolfe Winkler). In 2 years, outstanding student loan balances have shot up over $100 billion. Is a college degree […]

Posted by Some Thoughts On Student Debt « Eisenhood | Report as abusive